CRM – A Successful Misconception

Over the recent decades, global markets have undergone a gradual shift towards customer focus. According to Carpenter, this has happened due to several reasons: political reforms, which expanded consumer choices, fueled the growth of middle class, and created massive wealth; digital revolution, which empowered consumers through access to information and to one another; and new technology, which has fueled disruptive innovations.

Today, we can easily say that the customer plays a crucial role in the development of strategies, processes, and activities of organizations. In such a customer driven economy, customer data is key towards profitability. Customer Relationship Management (CRM) has evolved as a result of the need to acquire these customer data.

Anton defines CRM as a comprehensive business and marketing strategy that integrates technology, process, and all business activities around the customer. CRM has proven to be fruitful, if done right. A study by Gartner shows that global annual expenditure of CRM keeps increasing every year; this year, it is more than $20 billion, and is predicted to reach $36 billion by 2017. On the other hand, CRM failure rates are very concerning; a study by Krigsman shows an average failure rate of around 50% over the past decade.

With around 50% failure rate, CRM expenditure keeps increasing every year. Why would this happen?

One of the key reasons has been the inability to build a consensus definition of CRM, which has caused confusion to organizations as to what CRM really does, hence the implementation hurdles. Literature shows that many organizations have had a vague understanding of CRM and made the mistake of approaching CRM as a software tool only. CRM software tools are important because they are able to deliver great insights, but the software deliverables need to be made sense of. Furthermore, a CRM strategy may not function without a platform/software; however, CRM is not the software per se. Rather, it is a broader business/marketing strategy that tries to integrate the whole organization towards a better relationship with the customer. The CRM software tools are the technology that push that strategy forward. Approaching CRM as a software only, makes organizations lack a holistic approach towards the customer. Moreover, it disables the organization from having cross-functionality of customer data flow between various departments within the organization, increasing the risk of failure.

Various interpretations of CRM have caused organizations to build greater expectations about CRM than the actual deliverables that CRM can really offer. A technology approach only towards CRM immediately leads to implementation without strategizing and increases the chances of failure.

Organizations should not rush into implementing CRM immediately. Rather, they should have a more holistic approach towards the customer, i.e. a strategic plan of CRM implementation that best works for the organization before any incentive of implementation.

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References:

Carpenter, Gregory. “Power Shift: The Rise of the Consumer-focused Enterprise in the Digital Age.” Kellogg School of Management. www.kellogg.northwestern.edu, 2013. Web.

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